cancel
Showing results for 
Search instead for 
Did you mean: 
Highlighted
Level 1

Exchange Rate to use when Paying Foreign Supplier from Foreign Currency Account

Good day all,

 

When dealing with Foreign Supplier Bills,  we enter them using the prevailing exchange rates on day of import. Each Foreign Supplier has their own account setup in the Currency of the Supplier (GBP). We then pay Foreign Suppliers about 30 - 60 days later using either of the two methods shown below. (I have shown currencies below as USD and GBP, as the currencies we use in our region are not very common.)

 

1) Paying Foreign Supplier from Local Bank Account held in Home Currency (USD).

 

- The foreign supplier is paid from our Local Bank Account held in Home Currency (USD). The bank converts this to Foreign Currency (GBP).

- USD amount actually deducted by the bank divided by the GBP Invoice amount gives us the actual Exchange Rate used, and this is entered in the 'Exchange Rate' field in the 'Pay Bills' Window leading to either Exchange Gains / Losses.

 

I should believe the process we are using above is straightforward and correct when paying using our Home Currency.

 

What I have a problem with is how to account for Exchange Rates when paying directly through our Foreign Currency Account (GBP) as shown below:

 

1) Paying Foreign Supplier from Foreign Currency Bank Account held in Foreign Currency (GBP).

 

- When Exchange rates are favorable, we convert and transfer a bulk amount of Home Currency (USD) into Foreign Currency (GBP).

- This is accounted for by using the 'Banking > Transfer Funds', to transfer from our USD account to the Foreign Currency GBP account (held at the same bank) using the Exchange Rate provided by the bank for conversion.

- We pay the due amount to each Foreign Supplier when required using these already converted funds.

 

Now, since there is no conversion at time of payment to Supplier (as GBP to GBP in this case), please advise what I am supposed to enter in the 'Exchange Rate' field in the 'Pay Bills' window? How are Foreign Exchange Gains or Losses accounted for in this case?

 

I hope the above query is clear and your opinions and suggestions are most welcome.

Thanks.

10 REPLIES 10
QuickBooks Team

Re: Exchange Rate to use when Paying Foreign Supplier from Foreign Currency Account

Hello, @intgl.

 

You're on the right track in writing a supplier bill. The Currency Revaluation is translating your foreign currency into your company's reporting currency. I'm here to share a few insights and help you from there.

 

To start with, the concept of currency revaluation is updating all the changes in the exchange rate for your home and foreign currencies.

 

On the other hand, once a transaction has been paid with the home currency account, you're unable to convert them into a foreign one. Because the exchange rate will always show on your transactions and your home currency is the default display of your report's data.

 

To fix this, you can consider using your foreign bank account when paying your transactions recorded with the home currency. This way. it'll be posted into your specific foreign account.

 

In case you need some more insights, you can read this article to learn more about multicurrency: Set Up and Use Multicurrency.

 

Keep me posted if you have other questions. I'm always here to help.

Level 1

Re: Exchange Rate to use when Paying Foreign Supplier from Foreign Currency Account

Hello @juVielL ,

 

Thank you for your response.

Regrettably though, I feel my query has not exactly been addressed, hence would like to clarify as below:

 

I have indeed setup Multi Currency. 

Home Currency is USD.

Foreign Currency is GBP.

 

Foreign Suppliers are set up as GBP suppliers (as they Invoice in GBP).

In addition to my main Bank Account in USD, I have also setup a GBP account in Quickbooks.

 

When paying from my USD account, I have no problems with recording the Exchange Rates and subsequent Exchange Gains / Losses.

 

What I have a problem with is when I pay GBP suppliers using my Foreign Currency GBP account.

There is no currency conversion between USD and GBP here at time of payment. However, there is an Exchange Rate field at the bottom left corner of the 'Pay Bills' window that needs to be filled in.

What am I required to enter here please?

 

Thanks.

QuickBooks Team

Re: Exchange Rate to use when Paying Foreign Supplier from Foreign Currency Account

I thank you for taking your time in getting back to us, @intgl.

 

If you have not enter the exchange rate for the currency you're using, you'll have to manually enter it in the Pay Bills window.

Keep me posted if you have other questions. I'm always here to help.

Level 1

Re: Exchange Rate to use when Paying Foreign Supplier from Foreign Currency Account

@juVielL 

Thanks once again.

Per your screenshot, accounts payable is in GBP.

Bank Account is in USD. In the Exchange Rate field I enter the actual rate given by the bank at time of transfer. I have no problems here and this is what I have been following all along.

 

Now where I have a problem is where both accounts payable and bank account is GBP (foreign currency). Quickbooks still shows the Exchange Rate field in the pay bills window. What do I need to enter here?

 

Thanks.

Level 1

Re: Exchange Rate to use when Paying Foreign Supplier from Foreign Currency Account

Following my last message, please see below screenshot:

 

As you can see, the Supplier is a GBP supplier and is being paid from a GBP Foreign Currency account. What am I supposed to enter in the Exchange Rate field in the left corner? 

 

Please correct me if am wrong but in my opinion, there should not be required any entry for Exchange Rate at this stage as there is no conversion taking place. 

 

Thanks.

QB Q&A.jpg

QuickBooks Team

Re: Exchange Rate to use when Paying Foreign Supplier from Foreign Currency Account

We appreciate you for providing a screenshot, intgl.

 

The Exchange Rates are recorded as the number of Home currency units is equal to 1 Foreign currency unit.

 

When creating a transaction for the foreign currency (GBP) account, you'll still need to enter the exchange rates regardless if there's no conversion taking place. This will determine the home currency value of the transaction.

 

Then, the report will always reflect the home currency under USD regardless of the currency used in transactions.

 

I have articles here for more details about Multicurrency:

 

Please reply to this thread if you need anything else with creating foreign-currency transactions. I'm here to help.

Level 1

Re: Exchange Rate to use when Paying Foreign Supplier from Foreign Currency Account

Hello @RCV ,

 

Your response much appreciated.

If I understand you correctly, I should still enter an exchange rate regardless of the fact that no conversion takes place. I can do this and enter the prevailing exchange rates on the date of payments.

 

However, my worry is that this will not give accurate home currency values and exchange gains/losses. Per my understanding, an exchange gain or loss is derived as the difference between the exchange rate on date of Invoice/Import (midrate) and the actual exchange rate provided by the bank on date of Payment. This is easy in the case of USD to GBP.

 

Since we convert bulk funds and store till required in the GBP account, isn't there a feature that calculates home currency values automatically for each payment from the GBP account.

 

We use Banking > Transfer Funds each time we convert and transfer funds from our USD account to the GBP account, and input the actual exchange rates.

 

Please consider the below:

 

If we make the below transfers from our USD account to GBP account:

 

a) 15/05/2019 : USD 10000.00 to GBP 7785.00 (@0.7785)

b) 15/07/2019 : USD 5000 to GBP 3994.00 (@0.7988)

 

And we make the below payments from the GBP account:

 

a) 20/05/2019 : GBP 6000.00

b) 19/07/2019 : GBP 4000.00

 

Shouldn't there be a feature in QB or some procedure to follow that I am perhaps overlooking that possibly automatically translates the above payments to Home Currency (USD) values using possibly the average of the actual exchange rates used when converting funds between the USD and GBP Accounts?

 

Thanks.

QuickBooks Team

Re: Exchange Rate to use when Paying Foreign Supplier from Foreign Currency Account

Hello intgl,


 

The feature which you have referenced is not with in the current version of QuickBooks Desktop, the only area of the product which will generate exchange rates is when downloaded from the New York Stock Exchange in the Multi Currency options.

 

Can I please clarify if you are using the UK version of QuickBooks Desktop or Global?

Level 1

Re: Exchange Rate to use when Paying Foreign Supplier from Foreign Currency Account

Hello @EdwardR ,

 

Please advise if there is a manual work around for the process I mentioned, if indeed it is the appropriate method to follow.

 

Also, to clarify, my query is not about downloading or generating Exchange rates within QB.

 

Am using QuickBooks Desktop Premier sourced from South Africa (am guessing this is UK version).

 

Thanks. 

QuickBooks Team

Re: Exchange Rate to use when Paying Foreign Supplier from Foreign Currency Account

Hi @intgl,

 

Thank you for your prompt reply. I'm here to take care of your query about multi currency transactions.

 

In QuickBooks Desktop, You'll have to manually enter the exchange rates of any given transaction. As @EdwardR mentioned above, the feature you described isn't available at the moment.

 

I understand how this feature would be handy to you and a lot of other users out there. With that said, we've taken note of this suggestion.

 

Do you have other questions in mind? Post them below, and I'll get back to you.